Since late October, ethylene glycol has entered a downward trend again. Although there have been occasional rebounds during this period, the overall price is still weak. As of November 18, the main ethylene glycol contract 2101 closed at 3753 yuan/ton. Regarding the market outlook, we believe that due to the commissioning of new production capacity and the gradual entry of the demand side into the off-season, the overall trend of ethylene glycol is still weak. However, the decline in ethylene glycol futures prices will also be limited under cost support.
Supply pressure is still high
In November, domestic ethylene glycol production capacity continues to be put into operation. In early November, Henan Yongcheng’s 200,000 tons/year device and Xinjiang Tianye’s Phase 4 600,000 tons/year device were successfully discharged, and the load of the devices was steadily increasing; in the later period, there were 4 sets of devices including Hubei Sanning’s, totaling 1.24 million tons/year. The production capacity is planned to be released around December. If the device launch goes smoothly, the domestic annual ethylene glycol production capacity will exceed 17 million tons to 17.221 million tons by the end of 2020, a significant increase of 6.19 million tons or 56.11% compared with the end of 2019.
, domestic ethylene glycol production is expected to further increase, and the supply pressure of ethylene glycol is still high.
Demand gradually turns into the off-season
With the “Double Eleven” and overseas Christmas orders basically ending, the terminal weaving market gradually turns into the off-season, and The polyester market directly downstream of ethylene glycol turned weak earlier.
Since late October, after experiencing high production and sales for several consecutive weeks, as the inventory replenishment of downstream companies has basically ended, although the start-up of polyester plants has remained stable for the time being, market trading has It has become flat. Except for companies’ price reductions to promote production and sales, the production and sales of various polyester varieties have remained at around 50% most of the time. There is a significant gap compared with the average weekly production and sales that “broke 100” continuously in mid-to-early October.
In the week of November 12, the average weekly production and sales rate of domestic polyester chips was 121.84%, an increase of 19.84 percentage points from the same period in 2019; the average weekly production and sales rate of polyester staple fiber and filament yarn were respectively were 110.59% and 89.18%, an increase of 22.59 and 5.18 percentage points respectively compared with the same period in 2019.
The picture shows the effective annual production capacity of domestic ethylene glycol (unit: 10,000 tons)
On the other hand, port inventory continues to be destocked. Due to the impact of multiple hurricanes in the United States in the early stage, several local ethylene glycol units were forced to shut down. After losing a major import source country, my country’s ethylene glycol import shipments declined month-on-month, and the port inventory in East China also entered the In the continuous destocking stage, due to the large accumulation of stocks in the early stage, the absolute amount of ethylene glycol port inventory is still at a high level.
As of November 16, the ethylene glycol inventory at East China ports was 1.0878 million tons, a decrease of 336,400 tons from the peak on July 20, and a significant increase of 660,800 tons from the same period in 2019.
Cost support is relatively strong
Thanks to the sharp drop in international oil prices during the year, the processing cost of oil-to-ethylene glycol has dropped significantly. In the past, coal-to-ethylene glycol production The processing cost advantage of glycol no longer exists.
Except for July, oil-to-ethylene glycol has been able to maintain a certain processing profit during most of 2020, while coal-to-ethylene glycol has been in a state of substantial loss for a long time. When the profit was at its lowest, it was close to -1,500 yuan/ton.
Taking the two processes of oil and coal together, the current overall profit performance of ethylene glycol processing is poor. Therefore, without further decline in raw material prices, the cost end of ethylene glycol will receive strong support.
According to estimates, as of November 16, the domestic oil-to-ethylene glycol processing profit was 195 yuan/ton, and the coal-to-ethylene glycol processing profit was -978.2 yuan/ton.
In short, the intensifying contradiction between supply and demand and cost support have limited the rise and fall of ethylene glycol futures prices. In the later period, ethylene glycol will mainly be weak and volatile.
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